It is said that there is no such thing as a free lunch in life, and for my part I think that is mostly true. Most of the supposedly free meals that I have consumed have had some side effects that I would have preferred to avoid.

The one exception in the investing world is diversification. Owning a diversified portfolio truly is a free lunch.

This article will discuss why diversification is such an important concept to understand in investing, and how it can temporarily eliminate the usual tradeoff between returns and risk.

Diversification is one of the most important principles in all of investing, but it unfortunately does not provide any easy answers in and of itself. Investors that understand the principle in its entirety still need to figure out somewhat the basic question of asset allocation: which assets should I hold in my portfolio and how much of each should I own?

In the last article, we wrote about strategic asset allocation (SAA), which is the first major camp in the asset allocation world, and is still recommended by the majority of financial advisors and investing gurus. But not everyone agrees with the tenets of SAA.

Opponents to SAA mostly coalesce around some form of what is called tactical asset allocation, or TAA. This article will look at a broad overview of the TAA world, looking at what it is and how it has been practiced in the past.

One of the best ways that I have found to get acquainted with the strategies of some of the top hedge fund managers and traders in the world is to read the classic Market Wizards series of books. Author and trader Jack Schwager has...

In finance, risk has a very precise definition - the standard deviation of returns, also called "volatility". Standard deviation is a mathematical calculation that looks at how widely a series of data "moves around" from its trend-line average.

Investors lucky enough to secure a spot in one of Bernie Madoff's funds had it pretty good. Year after year Madoff produced remarkably consistent positive returns. By all accounts, their volatility was quite low. Madoff's investors must have...

Anyone with money invested in the stock market has to be prepared to suffer a sudden loss of capital, like "Black Monday" when stock markets fell over 20% in one single day. Some smart risk management techniques can reduce your risk of getting hit by what has been called a "black swan" event.

Like most people I think, everything that I can ever remember doing has seemed perfectly rational to me... at the second I was doing it. Reflecting years later... not so much. I won't go into details here, but you can use your imagination or look...